Democratic Underground

Depression Watch #4: A Jobless Recovery?
January 7, 2002
by Jerald Cumbus (JCMach1)

Last week on MSNBC, a respected Wall Street analyst for Bear Stearns who was retiring predicted that the U.S. economy would indeed enter into a recovery during 2002.  He clearly believed that there would be some recovery evident by the 4th Quarter of 2002.  His expectations are that corporate profits and stock prices will rebound at that time.  However, there was a disturbing element to his prediction:  he believed that the recovery would do little to change the deteriorating employment outlook.

This view is a far cry from most of the New Year's prognostications that have popped-up over the past week.  One moron (who shall remain nameless) on MSNBC even predicted there would be solid evidence of a recovery in the next couple of weeks. Many of these folks must have gotten the memo from Karen Hughes who stated earlier this week "there is some indication of good news" about the economy.

The SPIN of course does not stop there.  The conservative media whores spun the rise in unemployment to 5.8% as a positive.  Hello!  Reality check!  Unemployment continues to rise.  There are bound to be week to week fluctuations.  The thing that is easiest to see is the continued downward trend.

The Dow did of course regain some ground this week causing the media to wet themselves predicting a rebounding stock market.  Not sticklers for detail, they neglected to consider last week's tax selling and subsequent reinvestment this past week.  The news was screaming "rally," but anyone with a brain should be able to figure out what was going on.

The "rally" died a premature death this weekend with AOL/Time-Warner changing guidance for corporate profits.  Released on Saturday, this bucket of cold water should will govern most of the early trading next week.

Another factor in the Street's exuberance was December's Consumer Confidence report.  While it showed some recovery, most of the gain was caused by the dramatic fall of gasoline prices.  That trend is about to hit the fan.  OPEC announce a cutback in production by 1.5 million barrels.  Couple this with cold weather in the U.S. and oil prices surged to just over $22 a barrel.

In other news, the Depression Watch Economic Depression Indicator for the week of January 7, 2002 rose dramatically this week to 61.53 (+10.58).  The rise in unemployment and a deterioration in the trading value of U.S. currency caused the worsening of the indicator.

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